There was a time, not long ago, when endowment funds and college savings investments soared; institutions and students had cheap and plentiful access to debt; fundraising surpassed goals and broke records every year. There was a time when the question wasn't "should we embark on another capital campaign?" but "how long should we wait before announcing the next one?"

During those times it was fine to view institutional finances as impressionist paintings. Stakeholders got the gist: upward sloping trends demonstrating growth and options. The Financial Officer was behind the scenes ensuring the trains ran on time and funds were available for priority initiatives.

Today, schools are dealing with negative endowment returns, shrinking revenues, increasing costs of existing debt, unattainable new financing and growing financial aid needs for struggling families. The impressionist painting has been replaced by a high resolution photo of institutional finances. Everyone is focused on Finance.

This edition of In the Know discusses the key questions campus stakeholders are asking the Finance organization and how you can provide effective responses.

Sincerely,

Tracy Filosa

The shroud of mystery that veiled finances from the masses has been torn off as all walks of life realize Wall Street and Main Street intersect and, in a downturn, collide. In the crucible of campus life institutional finance is front and center as resources impact all stakeholders: Who will have a job? Who can afford to attend? What classes and services will be offered? What teams will play?

The Finance organization is answering fundamental questions, beyond the Board room. Responses need to be forthright and comprehensible.

How Much Do We Have?

This question is not nearly as much fun to answer as it was in the good old days. Nonprofits inherently do not make money. We depend on other profit making or resource-rich sectors to make us work: the capital markets, the credit markets, donors and the government. When those sectors pull back infusions institutional resources decline. The answer to "How much do we have?" is often "we have less."

The effective response candidly and honestly explains the factors that impact institutional resources. Campus stakeholders are keenly aware of overall economic conditions. The job of Finance is to put economics in the context of the institution and to explain how leaders are managing the challenges and planning for the future.

2. How Does it Work?

As a Finance professional it has taken you years to learn the ins and outs of educational investments, finances and operations. A downturn does not suddenly require everyone to be an expert. But as folks struggle to pay for school, keep their jobs and look to better days, Finance staff can help them understand the flow of funds into the institution and the very real costs of running the campus.

The effective Finance organization is preparing two responses. The first is a general explanation of campus resources and spending expectations for the faculty, staff, students and parents. The second response goes deeper to include the timing and flow of funds in and out of the institution for executives and the Board, and finance committees. The latter groups should be well-versed in financial information, and the interdependence of strategic and financial decisions.

3. What-if …?

In the old days static reports were sufficient to report consistent good news and growth. Today organizations need to be able to consider and plan for multiple possible scenarios. The economic environment is not static. Analysis cannot be static either.

Effective financial professionals employ and share dynamic financial tools to support and inform decision making across the organization. The goal is not to make everyone a financial expert, but to enable deans, department chairs and program managers to incorporate financial variables into their proposals and decision making. The effective Finance response promotes fiscal awareness and supports informed decision-making.

Be Out in Front

Whether your organization is just starting to grapple with contracting resources or has been responding for many months, you can be sure that stakeholders are looking to the Finance area for leadership, expertise and honest answers. While Finance cannot always provide good news, a consistent and realistic picture of conditions will give the institution the common understanding to move forward and work together through challenges.

In his November 2008 Update on Tufts and the Economy to the Tufts community President Lawrence Bacow wrote:

"I don't believe in across-the-board freezes or budget cuts. They are an abdication of management responsibility. We need everyone to be thoughtful about where we can save money in this challenging environment, and we must scrutinize carefully every single expenditure that does not impinge upon our core academic mission."

President Bacow describes a level of accountability that brings some opportunities for improvement and difficult choices. While some practices may have been enabled by short sighted excess, many make sense, but are simply under-funded.

Click the link below to read the full text of President Bacow's memo to the Tufts community.

November 2008 Update on Tufts and the Economy »

TAF CONSULTING is a responsive consultancy that helps colleges and universities develop effective organizations, plans, documentation and training programs. TAF brings nearly 20 years of experience in higher ed administration and a passion for the details and deliverables that enable institutions to realize their goals.